Just how much more severe is the financial hit now facing UK households due to rising energy bills? 📈
And how big is the financial hole in household budgets the government is being urged to fill? 💰
A thread...🧵1/
And how big is the financial hole in household budgets the government is being urged to fill? 💰
A thread...🧵1/
Start with May, when the government brought in its latest financial support package.
Here's @resfoundation modelling showing the projected hit by household vingtile from rising bills over 2022-23 (blue).
And the total financial support coming from government (red)... 2/
Here's @resfoundation modelling showing the projected hit by household vingtile from rising bills over 2022-23 (blue).
And the total financial support coming from government (red)... 2/
Notice that for those in the bottom quarter the financial supoort was more or less matching the expected increase increase in energy bills, which is why the May package was widely praised for being (belatedly) progressive...3/
But Putin's weaponisation of Russia' gas exports have sent wholesale gas prices soaring since May.
And it's these wholesale prices that determine the UK price domestic energy price cap...4/
And it's these wholesale prices that determine the UK price domestic energy price cap...4/
In May Ofgem was projecing the price cap to rise to £2,800 a year in October.
But it's now clear that that's a massive underestimate.
@CornwallInsight is now projecting the price cap to hit £3,400 this Autumn.
So around £600 more than Ofgem's May projection...5/
But it's now clear that that's a massive underestimate.
@CornwallInsight is now projecting the price cap to hit £3,400 this Autumn.
So around £600 more than Ofgem's May projection...5/
Plug that £600 extra into the May distributional chart (assuming £600 flat increase for every household) and you get the green bars below.
So the government support bars in red are now obviously getting swamped right across the income distribution...6/
So the government support bars in red are now obviously getting swamped right across the income distribution...6/
Which is especially concerned for those in the bottom quarter - who are far less likely to have savings - these are the "heating or eating" choice households...7/
In response, Rishi Sunak says he would cancel VAT from energy bills for a year.
& Liz Truss says she will temporarily remove "green levies" from bills.
These will reduce averge bills by around £150 - much smaller than the £600 gap that's opened up relative to May...8/
& Liz Truss says she will temporarily remove "green levies" from bills.
These will reduce averge bills by around £150 - much smaller than the £600 gap that's opened up relative to May...8/
Liz Truss also says she would reverse the April National Insurance hike.
But while according to @resfoundation calculations, this would save those in the richer half of households around £750, it would only save the POORER half around £150...9/
But while according to @resfoundation calculations, this would save those in the richer half of households around £750, it would only save the POORER half around £150...9/
For the most vulnerable households - those in the bottom quintile - the benefit of reversing the NI hike would be just £60, a tenth of the average projected bill increase....10/
Upshot: If the two PM candidates want to put the situation back to May, where the government was largely shielding low income households from the impact of soaring energy bills they would have alot more work to do...11/
ICYMI
The full #Newsnight explainer here 📺👇
The full #Newsnight explainer here 📺👇
https://twitter.com/BBCNewsnight/status/1556947949166403584?s=20&t=rKXbzCM5kbuAms0UTcwCUQ
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